Shareholders press F&N to explain future without Tiger Beer maker

Sat Aug 25, 2012 8:07am EDT

* Shareholders keen to know details of F&N's future business focus without APB before vote

* Minority shareholders collectively own 59 pct of F&N

* Thai Beverage owns 26 pct, Kirin owns 15 pct

By Charmian Kok

SINGAPORE, Aug 25 (Reuters) - Shareholders of Fraser and Neave (F&N) are urging the board to outline a future without Asia Pacific Breweries before they vote on a S$5.59 billion ($4.49 billion) deal to sell F&N's stake in the maker of Tiger Beer to Heineken.

Convincing shareholders of the merits of selling its roughly 40 percent stake to the Dutch brewer is crucial to the deal's success and to overcoming any opposition by billionaire Charoen Sirivadhanabhakdi, who controls F&N's biggest stakeholder Thai Beverage PCL. The board needs the support of the minority shareholders, which own 59 percent of F&N.

Four F&N institutional investors told Reuters the Singapore conglomerate had not approached them seeking support for the APB deal. F&N also has not gone to them with details on how it plans to use the sale proceeds or what they think the company will look like post-APB, they said.

"We need to know where do we go from here, do we sell off everything and call it a day or focus on property? What do we do with the money? Give back to shareholders, invest in existing businesses or start new businesses?" said Hugh Young, managing director of Aberdeen Asset Management Asia Ltd, which owns 0.39 percent of F&N.

Those factors will be considered when shareholders cast their votes, Young said.

F&N will continue to focus on its food and beverage, properties and publishing businesses, the group said in an emailed reply to questions on its future without APB.

Companies usually try and ensure there is support from shareholders before agreeing to major deals rather than making a decision and risking a veto by shareholders during a vote. Some of F&N's minority shareholders have been surprised that the group has not tried to win them over in this case.

While F&N's board is not obliged to disclose details of its plans to shareholders, it will eventually have to seek their approval for the sale of a key business unit like APB.

"You want some articulation of what's to be done with the proceeds if they are recommending (the deal)," said Young.

The F&N minority shareholders Reuters spoke to did not indicate if they would vote against the deal or refrain from voting at this time.

F&N said last week it planned to convene an extraordinary general meeting to seek approval of all shareholders on the sale, but has not yet decided on a date.

"We are a little surprised they haven't approached us yet. Normally in takeovers they would have to sound out the bigger shareholders," said a source with an F&N institutional shareholder, who declined to be named because he was not authorised to speak to the media.

PENALTY CLAUSE

Besides giving its stamp of approval on Heineken's $6.35 billion offer for the stakes held by F&N and APB's minority shareholders, F&N's board also agreed not to engage in talks or accept other offers for its interests in APB.

Heineken also attached a S$55.9 million break fee on its offer and set a Dec. 15 deadline.

While such penalty clauses are not uncommon, some shareholders say the clause puts F&N at risk since there is no guarantee the deal will be approved. Moreover, it was Heineken that sought full control of APB rather than F&N, which offered the stake for sale.

"The board was wrong in locking itself into a deal with Heineken. The break fee is even worse," said Mano Sabnani, CEO of corporate advisory firm Rafflesia Holdings, who did not say if he holds F&N shares.

Although F&N will gain S$5.59 billion from the sale of APB, its earnings base would be significantly reduced without future income from the beer maker. APB generated about 48 percent of F&N's earnings for the nine months ended June, according to Nomura.

A successful deal with Heineken could lead to a breakup of F&N, with Coca-Cola eyeing its popular soft-drink 100PLUS, fruit juices, mineral water and dairy products unit.

Coca-Cola, the world's largest soft-drinks maker, sees a possible opportunity to bid for F&N's beverage business but is waiting to see how thintgs go, a source familiar with the situation told Reuters.

A group linked to Charoen had countered Heineken's initial S$50 a share offer by making a S$55 bid for F&N's direct stake in APB. The partial bid for APB expires on Friday.

F&N's second-largest shareholder is Kirin Holdings, which holds a 15 percent stake in the Singapore conglomerate and has one seat on its board.

The board on Aug. 18 recommended Heineken's sweetened $53 a share offer to F&N shareholders.

Kirin declined to comment.

Prudential PLC is another large F&N shareholder with a 8.0175 percent group interest held via units including Eastspring Investments and M&G Investment Management Ltd.

Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.